Oil Slips on Ukraine Risks and Improving Weather Forecasts

Edited by Vani Rao

Natural gas prices fall after supply picks up

Oil futures closed slightly lower on Thursday, 27 February 2014, as the market digested the lower-than-expected climb in US crude supplies and rise in distillate stock piles. The natural gas market, meanwhile, ended at a loss after the release of weekly supply data.

Oil traders also assessed the risk from the increased turmoil in Ukraine and listened in on testimony from US Federal Reserve Chair Janet Yellen. On Thursday, the oil futures traded on the New York Mercantile Exchange (Nymex) hit a session low of $102.05 a barrel and a high of $102.24 a barrel to settle at $102.40 a barrel. Nymex oil futures were likely to find support at $101.03 a barrel, Tuesday’s low, and resistance at $103.45 a barrel, Monday’s high.

Source: Bloomberg
Source: Bloomberg

In a parallel development, the US Department of Labor announced that the number of people filing for initial jobless claims rose to 348,000 from the previous week’s total of 334,000. This increase resulted in the oil prices falling over fears that the US economy is still on a difficult road to recovery and that it will consume less fuel and energy.

Moreover, the US Department of Commerce reported on Thursday that US durable goods orders declined by a seasonally adjusted 1% last month, less than expectations of a 1.5% drop. Core durable goods orders, excluding volatile transportation items, rose 1.1% in January, the largest increase since May 2013.

Elsewhere, armed men took control of the parliament and local government offices in Ukraine’s Crimea region early Thursday, barricading themselves inside and raising a Russian flag over the building. This marked a deepening of tensions between pro-Western protesters that drove the country’s pro-Russian president from power on Saturday.

On the ICE Futures Europe Exchange, Brent crude shed 56 cents, or 0.5%, to $108.96 a barrel. Tensions in Ukraine have hit the Russian ruble, which tumbled to an all-time low against a Euro-dollar basket on Thursday. The dollar, a traditional safe-haven currency, gained ground against the ruble. A stronger dollar can weigh on dollar-priced commodities.

The situation in the Ukraine has not affected the West Texas Intermediate crude traded on the Nymex, but it is being cited as a contributing factor to losses in Brent crude. Prices also came under pressure after updated weather-forecasting models called for a return of milder temperatures across the eastern US. This signalled that the country could use lesser fuel as compared to past few weeks when the weather conditions were colder.

Meanwhile, in a testimony before the Senate Banking Committee, Yellen offered no surprises in terms of her plans for the central bank’s stimulus program. She said it would take a “significant change” in the outlook for the Fed to pull back from its gradual reduction in monthly asset purchases

Nymex crude prices fell during Asian trading hours on Friday after data on weekly US jobless claims missed expectations and on forecasts of warming weather conditions over much of the country. West Texas Intermediate crude for delivery in April traded at $102.09 a barrel during Asian trading, down 0.14%.

Natural gas stays low

Natural gas prices settled lower on the Nymex amid increased volatility in the immediate wake of the latest US weekly supply data releases.

Source: Bloomberg
Source: Bloomberg

April natural gas fell 3 cents, or 0.7%, to $4.51 per million British Thermal Units (BTU), adding to the steep losses earlier this week.

The US Energy Information Administration (EIA) reported that supplies of natural gas fell 95 billion cubic feet for the week ended February 21. The decline was a bit lesser than market expectations, as analysts surveyed by Platts, a provider benchmark price assessments in the physical energy markets, forecasted a decline of between 102 billion cubic feet and 106 billion cubic feet.

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